Economy set for a payoff phase—if external risks don’t trip it up

stronger than it appears today,” he said.

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The measures he was referring to: income tax relief of ₹1 lakh crore and goods and services tax, or GST, rate cuts that resulted in an estimated consumption boost of ₹2-2.5 lakh crore.“There are also efforts at further regulatory reforms including the labour code, nuclear energy (Shanti Bill), 100% FDI in Insurance and likely customs duty reforms going forward,” Shukla said, backing up his prediction of around 7% economic growth in FY27 despite the uncertainty around trade wars and the adverse base effect.

This year’s expansion has been supported by a combination of a robust rural economy, tax cuts, front-loaded public capital expenditure and steady credit growth, according to the RBI, economists Mint interviewed, and multilateral agencies. Axis Bank has forecast 7.5% growth both this fiscal and next, as the benefits of monetary and fiscal easing and labour reforms become more pronounced.

Still, one engine is sputtering. Net exports have slipped into negative territory, partly due to US tariff shocks, though rising services exports have cushioned the impact of higher goods and services imports so far this year.

Trade tensions may persist into 2026, keeping uncertainty elevated, even as negotiations for a US-India trade deal continue. Meanwhile, surplus capacity in China, leading to concerns around dumping, is expected to keep imported inflation benign.

On the rupee front, since India is a net importer of goods and services, a weaker currency means a swollen import bill. Higher cost of imported fertilizers will add to Centre's fertilizer subsidy burden unless part of the cost is passed through to farmers or its use is limited. Since oil subsidy is limited to cooking gas, the impact of higher oil import bill on the fisc will be limited.